World's top two said to be eyeing Foster's

FOSTER'S Group's $3.2 billion acquisition of Southcorp and the
global wine glut could ultimately prove to be the beverage group's
Achilles heel, with several foreign takeover suitors understood to
be sizing up the company for a potential takeover.

The world's largest brewer, InBev, is believed to be running the
rule over Foster's, with its next largest competitor, SABMiller,
rumoured to be also be mulling over whether to make a $11
billion-plus play for Australia's largest wine and beer group.

The speculation comes as Foster's is expected to announce its
full-year profit this morning, along with major revamp of its
flailing wine operations and a relaunch of the beleaguered
Rosemount wine label it inherited from its Southcorp
acquisition.

InBev and SABMiller have made no secret of their interest in the
Asia-Pacific, with both recently spending billions of dollars
recently to gain strong footholds in the fast-growing Chinese and
Indian beer markets.

Now, it appears the two have a growing interest in Australia's
beer market which, while a mature one, would provide both companies
with a solid base in the region - along with healthy cash
flows.

SABMiller this month sought to lift its presence in Australia by
forming a joint-venture with Coca-Cola Amatil, to distribute its
Peroni Nastro Azzuro, Pilsner Urquell and Miller's Draft brands.
Amatil and SABMiller also have not ruled out the future potential
of building breweries in Australia through their joint venture.

While Foster's has raised almost $1 billion in recent months
selling its international brewing operations, rivals such as
SABMiller and InBev have been driving the global consolidation of
the global beer market.

SABMiller this month bought the Foster's name along with its
breweries in India for $US120 million ($158 million), while
Foster's also offloaded its Vietnam and Chinese brewing businesses.
Earlier this year, Foster's sold its brand name in Europe to
Scottish & Newcastle.

The Foster's flagship beer label - which prides itself as being
the world's seventh highest selling "premium" beer brand - is being
seen as an increasingly attractive target, particularly given the
recent interest of large private equity firms in Australia.

One other opportunity for any potential takeover suitors is the
ongoing wine glut, which is expected to provide a drag on Foster's
share price for the next two to three years.

If any takeover proceeds from any beer brewer or even a private
equity player, it is likely Foster's wine interests will be
divested.

Unlike Foster's, Lion Nathan could be out of bounds for any
takeover bid. It is already 46 per cent owned by Japan's Kirin
Brewery Company.

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